263. Telegram From the Embassy in Greece to the Department of State0

2902.1. According Bank of Greece Governor Zolotas, Prime Minister Karamanlis has decided that “for the time being” settlement of Greek [Page 665] pre-war bond debt is “inappropriate and politically dangerous.” Zolotas has so notified Messrs. Munro and Niemeyer (Presidents of American and British Bondholders’ Councils, respectively) by letter. Has also sent explanatory letter to Riddleberger.1

2. While not specified in letters, reason for decision is recent discovery that Yugoslav bond settlement with France last autumn was on much more modest basis than that being discussed for Greek bonds. Although somewhat uncertain on figures, Zolotas understands $180 million Yugoslav debt was settled for $10 million payable over 12-year period, interest free.

3. In face such highly favorable settlement obtained by Yugoslavia, GOG sees no chance Parliamentary approval for Greek settlement on significantly less favorable terms and feels any effort obtain approval would shake position of government. Therefore Karamanlis believes that it no longer possible continue discussions with Bondholders on previous basis, and that discussion should be either suspended or switched to some other basis. Between these alternatives, suspension seems better for time being. No indication yet as to GOG thinking on suspension, duration or nature of new basis for negotiation.

4. Matter further complicated by Zolotas’ understanding Bulgaria and Poland have settled on basis similar to Yugoslavia—i.e., interest free and with debt settled for 10 percent or less.

  1. Source: Department of State, Central Files, 881.10/6–1959. Confidential; Limit Distribution. Repeated to London, Bonn, Belgrade, and Paris.
  2. Not further identified.